Why do Some African Countries Attract Oil and Gas Investments While others Struggle?

In 2014, Nigeria attracted the largest amount of Foreign Direct Investment (FDI) in the continent, with inflows exceeding $22.1 billion that year.

This influx of capital fueled major projects including deepwater exploration and development of new oil fields.

FDIs coming into the Nigerian oil and gas industry have dropped to an unacceptable level about a decade later. For the first time in history the first quarter of 2023 attracted zero FDI. In the first quarter of 2023, oil inflow was just $750,000.

The country’s National Bureau of Statistics is yet to publish its full year 2023 FDI report, however significant improvement should not be anticipated. Despite the country’s enormous oil and gas reserves oil investors are shunning the industry.

Nigeria’s crash shouldn’t shock industry watchers. It is the inevitable outcome of poor governance, corruption, bureaucracy, insecurity and poor legislation that have plagued the industry for decades. Emerging oil producing countries have to take heed in order not to tread the same path as Africa’s largest oil producer.

Renowned energy consultant, Dr. Wisdom Patrick Enang has adduced factors that encourage foreign investments into oil and gas projects. He listed fiscal terms, cost of doing business, regulatory environment and internal risks as major factors that could influence investors sentiment and determine whether they come or exit a particular country.

Enang who spoke on the topic, “Why some countries are attracting oil and gas investments, while others struggle,” at the 3rd Offshore Africa Energy Summit in Accra had downplayed resource size as the decisive factor for attracting FDI saying, an investor will primarily look for a clime where his money is safe. “An investor looks at the country-its macro and micro economics to determine the bankability of the project and determine whether his investment is safe there.”